northern nevada real estate journal vol. 1 issue 2

Northern Nevada Real Estate

Volume 1,Issue 2

A special publication brought to you by the

COMMERCIAL | INDUSTRIAL | RETAIL | LAND | OFFICEMonday, July 21, 2014 | www.nnbw.com

By Rob Sabo

[email protected]

Investors of all types continue to scour the Reno-Sparks market in hopes of finding deals paying above-average returns over their core markets. Aiman Noursoultanova, senior vice president of the Reno investment properties Group with CBRE, says the Reno-Sparks market on average is 100 to 200 basis points higher than the Sacramento Valley and San Francisco Bay Area markets, which is drawing flocks of investors over the Sierra. “The market is attractive because in essence we are in a growing market,” Noursoultanova says. “We have very little government scrutiny and job prospects are really strong. That translates into rental growth, and when we have good growth in buildings occupied by tenants with fairly long-term leases, investors are coming into our market.” Yields in the Bay Area tend to run between 4 and 5 percent, she adds, which can place a great deal of investment money at risk for a very small rate of return. Yield in Reno is averaging between 6 to 8 percent, which is bringing more investors than ever before over the state line. “To earn that extra 200 points on the investment is very attractive,” Noursoultanova says. “In the Bay Area there are so many folks investing that demand is strong and it’s hard to find good product or any type of property investment. We are so small that we create more opportunities for them to consider, and with the added bonus of a better return we become very attractive. There are a lot of folks looking for deals right now.” Investors have been a mix of large institutional investors and small private investors in the $1 million to $8 million range, Noursoultanova

adds. That’s a big change from years past, when financing was so tight that the only deals getting done were to all-cash investors. Multi-family continues to be the hottest property type for several reasons. Foremost among them is the availability of smaller investors to secure bank financing to carry the bulk of costs for apartment deals. Another reason: high occupancy rates at apartment complexes spreads the financial risk among that large pool of tenants versus office buildings with a small handful of tenants, Noursoultanova notes. Office sales aren’t overly strong, adds Melissa Molyneaux, vice president with the office properties group at Colliers International, but the few properties up for sale are drawing multiple bids. Colliers in 2012 listed a garden office property in South Reno that drew zero offers, but when the property was relisted earlier this year a pool of qualified buyers had put in offers before Colliers even finished creating marketing collateral for the property. The change reflects increased confidence about the economy of Reno-Sparks, she says. “That was really surprising,” Molyneaux says. “We had buyers coming out of 1031 exchange and

had five offers — I got an inquiry almost every day on it. People are finally able to sell other properties and get equity, and there’s not a great abundance of properties in primary markets. Now that our economy has improved we no longer are such a risky investment.” Sales in the local office market primarily have been to local private investors, Molyneaux adds, since institutional investors on the whole tend to seek industrial or multi-family deals. And though sales volume for office properties is down, that’s not

necessarily a bad thing, Molyneaux adds. There’s much less bank-owned real estate in the market, and that will lead to a rise in arms-length transactions and office values. Noursoultanova says that the continually improving economic climate of the Truckee Meadows is helping all investment brokers in the area. “We have job growth, companies coming to our region, and properties occupied by tenants. That really helps us sell our region of the state to investors,” she says. ●

Investment activity continues to heat up

This garden office property in South Reno originally was listed in 2010 and generated little response. A few years later, bids came in quickly from investors seeking tax-deferred

investment opportunities when the building was relisted by Colliers. Rob Sabo, [email protected]

This building in South Meadows, purchased on the courthouse steps, was one of few large bank-owned properties left in the region. Rob Sabo, [email protected]

The market is attractive because

we are in a growing market.

We have very little government scrutiny and job prospects are really strong.

– Aiman Noursoultanova

What’s Inside…Land 3Office 4Retail 4Downtown Office 6Tenant Improvements 7South Meadows Office 8Powning District 9Broker Profile 10Question & Answer 10Downtown Development 11

2 | Northern Nevada Real Estate Journal | Monday, July 21, 2014 | www.nnbw.com

NAIOP Membership Elevate your career to unprecedented levels with NAIOP...

www.naiopnnv.com

Align yourself with the leading organization for developers, owners and commercial real estate professionals.

Commercial real estate is a non-stop, exhilarating, evolving, dynamic industry - miss a beat and you're left in the dust. Never has it been more important to foster your networking circles, educate yourself on the latest industry trends and rely on a steadfast association that's working attentively on national, state and local level legislation on behalf of commercial real estate developers, owners, asset managers and professionals.

Legislative Advocacy. Critical Networking. Informative, Insightful Programs & Events.

NAIOP Northern Nevada. It has never been more essential to be connected. NAIOPNNV.com

To learn about NAIOP Northern NV activities, membership details or sponsorship information visit NAIOPNNV.com or contact [email protected], 775.354.3454.

This year, NAIOP’s Annual Bus Tour (Friday August 22nd) will feature some of our region’s newest developments and a couple of the fastest growing industries in the Truckee Meadows.

Northern Nevada Real Estate Journal | Monday, July 21, 2014 | www.nnbw.com | 3

Building boom reduces supply of finished lotsBy Rob Sabo

[email protected]

The flurry of homebuilding in Reno and Sparks is leading to a shortage of finished lots, which could lead to a rise in housing prices as developers create new subdivisions on raw land. At the start of the year there were roughly 1,900 finished lots (developable land with all public utilities already in place) in Reno and Sparks, says land expert Mark Krueger of ArchCrest Commercial Partners. By way of comparison, when the housing market first entered the protracted downturn there were roughly 5,000 finished lots saturating the market. “We are dwindling; we have a lot of guys getting out of the ground, eating up that existing supply and creating new finished lot subdivisions,” Krueger says. “We have had a surplus since the bust, but as of now we have an extremely limited supply of finished lots.” Based on development activity, Krueger says, builders already have chewed through more than half the available supply of finished lots and are buying paper lots, or unimproved land. The changing landscape is a return to normalcy for land brokers, who spent the greater part of the past few years selling bank-owned land to investors or large regional homebuilders. “From 1995 to 2006, I’m not sure if I sold one finished lot,” Krueger says. “The market here till peak was all paper. Everyone has been feeding

off the finished-lot inventory, but we now are getting back to normalcy, which is buying land, preparing maps, and building lots.” Brett Edwards, vice president and land specialist with CBRE, says the supply bank0-owned land essentially is gone. “Most everything that could be acquired has been; there is no more REO property,” Edwards says. Increased demand for raw land means development of paper lots finally is penciling out in the most desirable parts of Reno and Sparks such as Damonte Ranch, West Reno, Spanish Springs and Sparks. However, costs still don’t work out well in the North Valleys and Lyon County markets of Fernley and Dayton, Krueger notes. But new home prices could see a run-up as builders are forced to spend more money to develop raw land.

“We are getting positive residual land values now in all submarkets,” Krueger says. “Finished lot values have pushed up well above replacement costs — but if you are forced to pay more for raw land, obviously there will be higher cost on finished product. As land values continue to move up there will be pressure on house prices as result of having to put those lots in.” Land values are rising across all sectors, Edwards adds. There are several large new apartment projects under construction, and the region is poised for a new round of growth in medical office buildings, he says. Demand for industrial land also is heating up, led by large speculative and build-to-suit developments currently underway in Spanish Springs, Stead and Tahoe Reno

Industrial Center. Those distribution and fulfillment centers will create new jobs, Edwards says, which in turn impacts housing availability. “There is very strong interest in industrial land,” Edwards says. “There appear to be a lot of new jobs coming into the region, which will further put pressure on house pricing. “Demand is increasing, and that helps everybody,” he adds. “2013 was record year for net absorption of over 4 million square feet. When vacancy falls, it spurs the need for new construction. We are seeing manufacturing and tech jobs come in. This region is adding the types of jobs that really diversify the area, and it is all positive. ●

We have a lot of guys getting out of the ground,

eating up that existing supply and creating new finished lot subdivisions. We have had a surplus since the bust, but as

of now we have an extremely limited

supply of finished lots.

– Mark Krueger

Homebuilders such as Ryders Homes have largely exhausted their supply of finished lots and are creating new streets to expand subdivisions. Rob Sabo, [email protected]

Welcome to our world.

downtown office space • warehouse • NonProfit co-location

(775) 322-1025 amhprop.com

Kietzke poised for spec office development

Businesses streaming into long-vacant retail spaces

By John Seelmeyer

[email protected]

The first speculative construction of new office space in the Reno-Sparks area since the recession is just over the horizon. But before developers begin moving dirt for projects planned along Kietkze Lane between Neil Road and McCarran Boulevard, they’re spending long hours in meetings to

make sure that the projects have the right feel. “Getting the concept right is the challenging part,” says Todd McKenzie of McKenzie Properties in Reno. “One you have the concept right, everything else is numbers.” McKenzie Properties, which is wrapping up development of the South Creek retail and office complex at South Virginia Street and South Meadows Parkway, is making plans

for a pedestrian-friendly campus on the 12.3 acres it owns on Kietzke. Once part of the Rancharrah property, the property owned by McKenzie is just north of First Independent Bank on the west side of the busy street. KCI Properties, which owns former Rancharrah property south of the bank property, isn’t talking about plans for its land at the corner of Neil Road and Kietzke.

McKenzie’s preliminary plans call for construction of about 150,000 square feet of office space — including the possibility of some medically oriented space — along with about 50,000 square feet of restaurant and retail space, McKenzie says. The company wants to develop what he calls a “high-amenity campus” that encourages office users and retail visitors to linger. “People like to be around people,” McKenzie says. But nailing down the detail of those amenities is taking some time. “The cornerstone of any project is creating that unique experience,” the developer says. While Colliers International estimates the vacancy rate in office buildings around the Reno-Sparks area at about 17 percent, it’s a couple of percentage points lower in the Meadwood market. That demand, McKenzie says, has pushed rents up far enough that speculative office projects are beginning to make sense. But, he adds, “It’s very expensive to build right now.” Potential tenants, McKenzie says, range from a technology company that might lease the whole thing — no, he doesn’t have anyone particular in mind — or a collection of users who each lease smaller spaces. McKenzie Properties expects to begin construction on the Kietzke project next spring, with the first buildings ready for tenants by fall. ●

By Sally Roberts

[email protected]

In a burst of activity, doors are opening and customers streaming in to retail space that’s sat idle for years. “Optimism is back,” says Shawn Smith, vice president of the retail services group at CBRE. “One of the trends is that we’re seeing anchor boxes that have been empty for awhile getting back filled. They are very, very positive changes that will attract more smaller businesses into the centers.” Kelly Bland, senior vice president of NAI Alliance’s retail properties group, agrees. “We’ve turned the corner,” Bland says. “Once bigger, anchor space is filled, smaller retail businesses will come into the fold.” Bland is feeling positive for the first time in years. “I’ve been very conservative in my viewpoint up until this recent report,” he says. “We’re definitely moving in the right direction. Industry, job growth, housing and retail sales are all moving in the right direction.” In less than a year’s time Floor & Decor opened in the Firecreek Crossing on south Kietzke Lane in the former Safeway store. Consignment Furniture opened in the Sierra Center Parkway space left empty when Sierra Trading Post moved. Hobby Lobby moved into the old JC Penny furniture store. Nordstrom Rack is preparing to open in the long-shuttered Borders Books location. And, perhaps most encouraging, Natural Grocers is already in line to

open its first store in Nevada in the space newly vacated when Office Depot on Kietzke moved a few doors down. Another hot spot for retail is at the Legends at Sparks Marina. “The IMAX at Legends will bring more traffic, especially to that back part of the center,” Bland says, “especially the restaurants upstairs that died on the vine the first time.” Both O’Cleary’s and CBQ opened in April in the two long-empty locations above the central plaza at the center. Smith noted another encouraging sign is the increase in quick service restaurants opening all across the region, such as Chipotle Mexican Grill and Raising Cane’s. However, not every retail center is bustling and established businesses continue to close. Office Depot next to Costco on Plumb Lane will close its doors in August. Retail businesses that have already closed this year include Jack’s Cafe in Longley West Center, Fitness for $10 in Sparks and Blockbuster in D’Andrea Marketplace. Vacancy rates are still high for small retail business — those setting up shop in strip malls or line centers — at 22.3 percent in the Reno-Sparks market. “We’re seeing that come down slightly,” Bland says. “It’s moving in the right direction but slowly.” For small businesses, financing is harder to find, Bland says. Those potential business owners have lost equity in their homes and other investments that historically provided seed money. As personal

finances improve and banks loosen up, small-business owners will find funds to start new businesses, and the vacancy rate for strip centers will decrease. That said, the overall statistics for retail centers are encouraging. In the first quarter of 2014, the vacancy rate for retail businesses overall was 17.29 percent in northern Nevada, down from 17.45 percent in the previous quarter. For anchor spaces, the vacancy rate declined slightly to 13.78 percent compared to 13.79 percent in the previous quarter. About 76,960 square feet of retail space reopened for business in the first quarter of 2014. In another positive sign, sales tax revenue in Washoe County has increased every month since June 2013. First quarter 2014 growth “was lower than previous quarters but still positive,” Bland says. Not all the good news is showing up yet in statistics. Bland said the last report shows 17 empty big-

box spaces, but five of those have investment activity. “That statistic will go down rather substantially in the next six months,” he says. Smith expects to see Reno benefit even more as the economy in northern California improves. As chain stores look to expand from the Sacramento area, they naturally look to Reno. “We’re on the cusp of getting spill over (from Sacramento),” Bland says. “Investors like our resources. Shopping centers are firing up. Attitudes are upbeat. “Demand for investment properties — anything for sale with an income stream attached, is high,” he adds. “Smart people are taking advantage of prices and getting in.” While not every retail center is booming out of the recession, the trends are nevertheless encouraging for Reno’s future growth. “I’m very excited — I see the trends continuing for several years,” Smith adds. ●


Nordstrom Rack is renovating the old Borders Books location and adding 6,000 square feet to the building for a total of 31,000 square feet of retail space. Photo courtesy CBRE

McKenzie Properties plans nearly 200,000-square-feet of speculative construction along South Kietzke Lane. Rick Carpenter, [email protected]


www.comre.com

Reno Office6121 Lakeside DriveSuite 160Reno, Nevada 89511775.851.9500

WE OFFER COMPREHENSIVE BROKERAGE SERVICESThe commercial real estate industry moves quickly. Keeping up with the latest trends, forecasting upcoming opportunities and keeping our clients in the know is what we do.

• Tenant/Landlord Representation• Seller/Buyer Representation• Long-Term Business Strategy• Build-to-Suit Representation

WE CAN GET YOU THERE…

LOCATION, LOCATION, LOCATION…

NNBW_April2014.indd 1 4/1/2014 11:58:52 AM

Downtown Reno: The place to beBy Sally Roberts

[email protected]

The economic sun is shining again in downtown Reno. “Overall, the buzz is that downtown is the place to be right now,” says Scott Shanks, senior vice president and principal at NAI Alliance. “If you just walk downtown, you’ll see a lot more activity there than there used to be. There’s more to do. The activity in Reno has put a lot of young people downtown.” Downtown is “doing well, overall. Inventory has declined significantly,” Shanks adds. Tim Ruffin, managing director and senior vice president of Colliers International, also notes a more positive atmosphere around town. “It’s definitely improving. There are more leases taking place, for one thing. In addition, the attitude in the community is much more positive,” he says, including the long-depressed midtown area in the sunny outlook. “Clearly, a lot is going on in midtown. I work almost every Saturday and walk to midtown for lunch. There’s more activity, more young people out doing things.” Last year, the office market in Reno had its best year since the beginning of the Great Recession. According to Colliers’ year-end report, 2013 saw the logjam of vacant office space beginning to clear with the net absorption of 235,371 square feet of office space — 53,000 of that in downtown. That’s the greatest amount recorded since the boom

year of 2005. The largest sale of last year was the downtown US Bank building at 1 E. Liberty Street, which had been on the market since 2008. The 84,150-square-foot building sold in April for $5.98 million. The sale and lease of large properties has a noticeable ripple effect. After the US Bank building sold, Starbucks began moving plans to move in next to it, which further shows confidence in downtown, Shanks says. The University of Nevada, Reno, meanwhile, is taking its steps into downtown with the opening of administrative offices for its drone-research initiative The dramatic drop in downtown vacancy rates in 2013 could partly be due to the fear of rising interest rates, Shanks notes. Rates on SBA 504 loans, which benefit owner-users in a building, began inching up mid-2013. By June rates had reached 4.53 percent and, in September 2013, 5.7 percent. It finished the year at 5.46 percent. Business owners ready to invest are jumping in while interest rates are still low. “A lot of owner-users are finding cheap financing and taking advantage. They’re ready to buy, “ Shanks says. Smaller office space downtown is also in demand these days. Reno Engineering, which has been involved in the engineering of major projects in South Meadows and Reno-Tahoe

Industrial Center, became landlords while seeking to expand its own downtown office space. “We kind of got pushed out of our own project,” REC President Vince Griffith says. “The location was so popular, we couldn’t say no to tenants. There’s plenty of opportunities and decent buildings still around. We’re on a roll and excited.” That’s a big change to a few years ago. When Reno Engineering purchased property downtown three years ago, Griffith said, “the mood was solemn. People reacted with silence. They didn’t want to tell us we were crazy to buy downtown. “Now there’s a feeling of optimism among most people, tenants and landlords.” “There’s a lot of interest in being downtown,” says Marion Hose of AMH Properties, which specializes in investments, rehabilitation of office space and property management. “Businesses are moving from other areas of the city to be downtown.” AMH entered the downtown market in 2005. Buildings around them that were vacant stayed vacant through the years of downturn. “We’ve been through the good times, the bad times, the crying

times,” Hose says. Now, buildings are finding occupants. “It’s getting back to normal,” she says. “We’re just starting to see rents increase. Expect that dramatic transformation to continue to happen.” The economic lobbying by government and organizations such as the Economic Development Authority of Western Nevada seems to be helping keep Reno on the radar of businesses looking for new homes. “They’re keeping companies coming,” Shanks says. Talk that Tesla might build a battery factory in the Reno-area creates positive buzz about the area that increases interest from other large companies. With all the increasing activity in mind, industry leaders recommend business owners take advantage of today’s market while vacancy rates are still high enough to keep prices in the bargain range. “Prices are starting to go up,” Shanks says. “There are still a lot of quality spaces out there.” The declining vacancy rate will eventually stimulate construction. “Watch for further development when the vacancy rate falls below 10 percent,” Shanks adds. ●


Small companies are attracted to renovated space on Washington Street.

Courtesy AMH Properties

Owners of downtown Reno office spaces are beginning

to command higher lease rates as buildings fill up.

Courtesy AMH Properties

Distinctive Look, Unsurpassed Ergonomic Support

Aeron

IAN ANDERSON, PRESIDENT P: 775.323.3023 E: [email protected]

SHOWROOM COMING FALL 2014 - 211 W 1ST STREET WWW.HENRIKSENBUTLER.COM

Certified Herman Miller Dealer

CREATING GREAT SPACES TO WORK, LEARN & HEAL SINCE 1980 As Reno’s new Herman Miller certified dealer, Henriksen/Butler brings fresh perspective with

innovative furnishings for business, healthcare and education environments, plus a full range of

ergonomic tools, seating and technology support. Contact us to schedule an appointment today.


Tenant Improvements: Know Your Responsibilities

By Paul Georgeson

McDonald Carano Wilson LLP

If you lease property in Nevada, it is likely that you will be making tenant improvements to that property. If so, there are a number of legal issues to consider in that process. One such issue deals with laws that protect contractors on those projects so they get paid for their work. Those laws affect both the lessee and the owner of the property. Under Nevada law, when a lessee hires a contractor to complete tenant improvements, that lessee is required to take certain steps to effectively guarantee that the contractor, its subcontractors, and its suppliers will get paid for their work. There are two options to satisfy those statutes. One option is for the lessee to establish what is known as a “construction disbursement account” to fund the costs of construction. The other option is to obtain a “surety bond” for the benefit of those who perform work or supply materials to the project. A construction disbursement account (often also called a construction control account) is a type of account, similar to an escrow account, into which funds are deposited and then distributed based on certain specific requirements. Under the Nevada statutes, the account must be fully funded, in advance of construction, with enough money to cover the costs of the tenant improvements. As part of setting up that account, the lessee must hire someone, called a “construction control” in the statutes, who is in charge of distributing funds from the account. The construction control’s job is to inspect the project, review payment applications from the contractor, and then make payments out of the construction control account if the work has been done and everything is in order.

A surety bond is a guarantee of another party, in this case a surety company, to pay the debts of another. In this situation, the lessee purchases a bond from a surety company and the surety company guarantees to pay the contractor, subcontractors, and suppliers on the project for their work if they aren’t paid by the lessee. Under Nevada law, if the lessee chooses this option, it must purchase a bond with a value of 150 percent of the cost of the project. Once the lessee purchases the bond, it then has to record that bond with the county recorder’s office in the county where the project is located. Once the lessee either sets up the construction disbursement account or purchases the surety bond, it then has to record what is known as a “notice of posted security” in the county where the project is located. The lessee must also send a copy of that notice to anyone who has served the lessee with a “notice of right to lien” under the Nevada mechanic’s lien statutes.

Unfortunately, both options add to the cost of the project. Typically, the fees for either a construction disbursement account or a surety bond range between 1-3 percent of the cost of the work. In addition, both options create additional hoops that a lessee must jump through to get the project started. There are pros and cons with either option. The primary advantage of using a construction disbursement account is that you have an independent third party, the construction control, to monitor the work and decide whether payment is due to the contractor. Although the construction control does not inspect the project for compliance with building codes, they do check to make sure that the work that is being billed for by the contractor has actually been performed and completed and that all other requirements are being met. However, the primary disadvantage with a construction disbursement account is that it must be funded with the full balance of the cost of the work before the can begin. Many lenders are reluctant to fund the full value of the improvements in one lump sum before the work actually starts. Therefore, it could be difficult to get a lender to fund your project using a construction disbursement account. The primary advantage to obtaining a surety bond is that you don’t have to fully fund the work before it starts. Therefore, you can use traditional methods of financing, including bank loans where you take draws to pay for the work as it progresses. One disadvantage of using the surety bond option is that you don’t have the extra set of eyes on the project that you get from a construction control. Another disadvantage is that it may be difficult to find a bonding company to issue a bond.

The statutes also affect property owners. Although a property owner does not have to do anything under the statutes to protect itself, it can run into problems if its lessee does not properly follow the statutes. Historically, when a property owner knew that its lessee might improve the leased property, the owner could record what is known as a “notice of non-responsibility.” If the owner properly recorded a notice of non-responsibility, then it would not be liable to the contractor, subcontractors, or suppliers for the cost of the work incurred by the lessee. However, under these laws, a notice of non-responsibility is only effective if the lessee satisfies the requirements discussed above. Therefore, as a property owner who leases property, it is extremely important to make sure that any lessee follows these statutes. Otherwise, a contractor, subcontractor, or supplier may have valid mechanic’s lien rights against your property, and not just against the lessee’s interest in the lease property. In sum, whether you are the owner of property, or whether you are leasing property, it is very important to be aware of these statutory requirements. From the owner’s perspective, the failure of the lessee to satisfy these statutes could put your interest in the property at risk. From the lessee’s standpoint, the failure to satisfy the statutes could violate your lease, interfere with your ability to complete your tenant improvements, and also expose you to delays and additional liability and expense. ●

Paul Georgeson is a partner in the Reno office of McDonald Carano Wilson LLP. He is the chairman of the firm’s Construction Law Practice Group and he practices primarily in the areas of construction law, commercial litigation, and appellate law.

Fees for a construction disbursement account or surety bond range between 1 to 3 percent of project costs. Courtesy Miles Construction

Lessees who hire contractors for TI work must guarantee those contractors are paid for their work. Courtesy Miles Construction

Lights back on in once-dark South MeadowsBy Sally Roberts

[email protected]

Slowly, the lights are coming back on in the South Meadows, an area that saw the commercial vacancy rate climb to 23.1 percent by the end of 2008. For office space specifically, it was a dismal 28.1 percent for the same period. “South Meadows was built on the housing boom,” says Kevin Annis, broker and principal for ArchCrest Commercial Properties. “The majority of businesses occupying space were in housing businesses such as mortgage, construction, real estate. They all flooded to the South Meadows for the brand-new office space. They were all shuttered after the housing bubble burst. With vacancy at 23 percent, no one was constructing new spaces.” In the last five years, only two small commercial buildings were constructed in the South Meadows, he adds. Recent news is much better. By the end of 2013, the vacancy rate overall had dropped to 13.6 percent. “It’s really better. I like this market a lot better,” Annis says. “Since 2008, we have had five positive years.” Helping move the market forward are sales of the Class A buildings in South Meadows, says Matt Grimes, senior associate with CBRE’s office services group in Reno. “The best locations of Class A buildings are doing better than the rest, especially those with

visibility from the freeway,” Grimes says. “CustomInk took the largest contiguous office space in Reno off the market.” The custom T-shirt company opened its 58,000-square-foot office and West Coast headquarters at 9390 Gateway Drive in February. And GreatCall, which sells easy-to-use cell phones and medical devices, recently opened a call center in South Meadows. “South Meadows was in worse condition to begin with so the pace of improvement is fastest in the whole market,” Grimes says. “New businesses and existing businesses are beginning to expand as well. Residential related businesses are coming back into the market. There have been very positive trends in the last 12 months. That should continue.” Medical businesses are also on the increase in South Meadows, notes Annis. “So many homes are going up, now the services to take care of the residents are going in.” Annis recently completed a deal for a 33,000-square-foot Class A medical facility with a surgery center to be constructed on Double Diamond Parkway. His office also negotiated a lease with Morrison University for a 35,000-square-foot space. Annis is also excited about a major project he’s not ready to reveal yet, saying it will, “completely change the face of South Meadows.” While 2013 was great for commercial space in South Meadows, the first quarter of 2014 was sluggish.

But industry leaders aren’t worried. According to Tim Ruffin of Colliers International, the recovery is better than the numbers indicate. Shadow inventory — vacant space that had been taken off the market — is now back on the market, he says. “Activity has been active, but the market doesn’t reflect that yet because we’re putting shadow inventory on the market.” Nevertheless, it could be better. The demand for office space has softened since the recession. “People have discovered they can work from home and be more productive,” Ruffin says. “They’ve left the office market. Businesses that still need office space need less square foot per employee. Businesses that previously looked for 10,000 square feet of office space are now looking at 7,000.” Although the face of commercial real estate is changing, news is still good in South Meadows. As large contiguous office spaces get scooped up by companies such as CustomInk and GreatCall, look for new construction to pick up, Grimes

notes. Annis has noticed a subtle shift in the market this year. “We’re swinging from a tenants’ market to a landlord market with increased pricing for both renting and purchasing,” he says. And while too fast a climb can make people nervous, Annis sees enough differences between the over-inflated years that lead to recession and the current climb. “We’re not dependent on only one industry type (construction). Now we’re all over the map. With lending regulations, we’re not going to see anything like we saw. I’m pretty bullish,” Annis says. Adding to the excitement is the proposed southeast connecter that will link Sparks with Double Diamond. Combined with Interstate 580 that speeds traffic to Carson City, many see South Meadows as a central link between the two hubs. “Phone calls have gone up tremendously,” Annis adds. “It’s 2014 and everyone is waking up and anxious to go to work.” ●


Vacancy for office space in South Meadows has fallen from a recession-era high of 28 percent to less than half that at the end of 2013. Rob Sabo, [email protected]

S. Lake Tahoe FaLLon

775.885.2294 sbbuilders.com

NV License #47712

Industrial · Medical · Retail · Public Works Office · Hospitality · Tenant Improvements

Reno MindenCarson City sparks

Fernley BattleMountain

Your vision - our experience. You’ll find our footprint throughout Northern Nevada and California.

Umpqua BankNevada Health Center


Historic Powning District Reno’s newest hotspotBy John Seelmeyer

[email protected]

Paddy Egan acknowledges that Urban Real Estate Investments LLC had gone over the top when it finished some space for its own office in its project along Reno’s Riverside Drive. But Egan says the company that specializes in urban infill and mixed-used projects wanted something shiny to help potential tenants understand the possibilities. Executives of Newmont Mining liked the concept. A lot. So much, in fact, that the mining company leased the space from Urban Investments, which moved its office into another location in the project at Riverside Drive and Washington Street. But Biggest Little Group, a marketing agency, liked the space that Urban Investments had moved into. A lot. So once again, Egan, the managing member of Urban Investments, and his business partner, Joe Udvare, packed up and moved a couple of doors further north in the project dubbed “Riverside at Washington.” Not that they’re complaining. The 18,000-square-foot mixed-use project, which took forever and a day to get off the ground, today is entirely leased by a combination of local and national retailers as well as the office users that kept bumping Urban Investments from its home. “The demand for the office space has been unexpectedly high,” says Egan. Riverside at Washington, a redevelopment of most of a square block in the historic Powning District just west of Reno’s downtown, includes offices ranging from 500 to 1,500 square feet — small spaces for specialty users.

Along with Newmont and Biggest Little Group, office tenants in the property include attorneys Robert C. Bell and Rex W. Huntley and builder GenCon Corp. One of key selling points for office tenants, Egan says, has been the mix of retail tenants in the property. Hub Coffee Roasters does a strong trade through the day, and the outdoor tables near its front door are popular for business meetings. Other retail tenants include Dorinda’s Chocolates and Beaujolais, a French bistro that moved to the Powning District after a decade downtown. “We wanted people who were very good at their craft,” Egan says of the three food-oriented tenants. A salon, “Hello Darling,” opened in a renovated space that once was a four-car garage. Lululemon Athletica Inc., the yoga-inspired sportswear chain, brought the retail portion of the property to full occupancy when it opened a showroom in April. The mix is important for folks who work in the development’s office, says Larry DeVincenzi, strategy director for Biggest Little Group. “It reminds me now of the Reno I grew up in — friendly, approachable, and now it’s even hip to be here. As a small creative and public relations agency, we couldn’t have asked for better company and surroundings,” says DeVincenzi. A previous developer on the project began assembling the land package in 2005, but the project stalled during the dark days following the 2008 financial crisis. With the Powning District project thriving, Egan says Urban Investments now is looking to replicate its success elsewhere, either along the edges of downtown or in the neighborhoods near the University of Nevada, Reno. ●

Coffee at outdoor tables is an important amenity at Urban Investments’ Riverside Drive project.Rick Carpenter, [email protected]

Albuquerque | Casper | Colorado Springs | Denver | Las Vegas | Phoenix | Reno | Silicon Valley | Tucson

LRRLaw.comContact:Paul [email protected] [email protected]

50 West Liberty Street, Suite 410Reno, NV 89501

Serving the development and construction needs of our clients.

Our experience representing buildersand developers includes:

Construction ContractsMechanics Liens

Construction Defect DefenseConstruction and Commercial Litigation

Real EstateLand Use and Zoning

Local and State Government AffairsProperty Tax Appeals

Leaders in Builder Representation

Northern Nevada Business Weekly: Tell us about East West Commercial Real Estate and the duties of your position.Tony Reda: The company has been in existence close to 25 years and is headquartered in La Mesa, Calif. We are all over the West Coast and are opening offices across the nation. I am in management and handle all the duties of the office. I’m also interviewing people right and left.NNBW: How did you get into this profession?Reda: I was in a complete different business. By trade I am a professional neon tube glass bender. I had a sign business, and I sold a Century 21 residential broker a huge window sign. The day I came to hang the sign, I was working in the window and he was sitting on his desk watching me. He asked if I ever thought about getting into real estate, and said that with my sales ability I’d do real well. I’m in the Knights of Columbus, and I was discussing this with one of my brother Knights, and asked me to come to work for his company. The first year I became the No.1 salesman for the company.NNBW: Is this the career you had envisioned for yourself?Reda: I stumbled into the sign business by accident, just like I did real estate. It seems like God says, “Go this way.” But my family has always been in business, and that’s all I’ve known. I knew I was going to fall into something, but I didn’t have an exact street to go down.NNBW: What do you like most about selling real estate?Reda: Probably the type of customers that we work with and the competing brokers. When you are working with commercial brokers, as a rule you are working with a more sophisticated and educated person. Working with customers, the decisions come quicker.NNBW: What was your first job?Reda: Working with my family. We had small-town theaters all over Eastern Kentucky — television put them out of business.NNBW: Do you have any advice for someone who wants to enter your profession? Reda: Be honest and be aggressive. Give people a straight answer. If the roof leaks, tell them it leaks. In commercial real estate, if you lie about something, it could be a million-dollar lawsuit, and it could be your license.NNBW: How do you spend your time away from work?Reda: I am a big sports nut; I follow the seasons. Football is my favorite — I played ball in college. Right now I am following the Detroit Tigers. I’m also a pool player; you don’t want to play pool with me. I can almost guarantee I’ll make you mad.NNBW: What do you consider to be your biggest professional accomplishment?Reda: I sold a shopping center in San Jose that everyone told me I was nuts for listing. It was a strip mall, and the street it was on was a main thoroughfare. Most of the center was vacant because the anchor tenant had moved out. But we got a sign up and started doing the advertising, and in about 90 days an old man about 90 years old — he was a lumber baron who had just sold some major condos in Fremont. He spotted my sign and paid cash for the center, and I wasn’t so stupid after all. You pick those ones that nobody wants to look at, because you never know if that old lumber baron might be out there driving around. NNBW: What did you dream of becoming when you were a kid?Reda: I wanted to join the Air Force and become a pilot.NNBW: At age 78, you are past the age many people retire. Are you contemplating retirement?Reda: I’m semi-retired. But I’m Italian, and Italians don’t retire — especially if you’ve been in business. Once we’ve been in business and had the taste of money, you just don’t retire. There’s always a dollar out there to make, and we just go till we fall flat on our face.

THE BASICS

Name/title: Tony Reda/Broker and Manager for East West Commercial Real Estate of NevadaNumber of years in this job: 2Years in this profession: I got my license in 1975 and have been in commercial real estate since 1977Education: University of Louisville School of BusinessLast book read: “The Catholic Bible.” That’s my favorite bookFavorite flick: Coming from a family that’s in the theater business, I have a host of movies at No. 1, but one that I always enjoy watching is “The Best Years of Our Lives”What’s on your iPod: I don’t have an iPod.Spouse, kids or pets: My wife Adele and I just celebrated our 44th anniversary. We have five children and four grandchildren.

In his own words: Broker Tony Reda


Collier’s Ruffin has‘best job in community’By Sally [email protected]

Tim Ruffin has an insider’s view of many of Reno’s major commercial real estate transactions. “I’m fortunate to sell buildings in downtown,” says Ruffin, the senior vice president

and managing director of the Reno office of Colliers International. “Almost every building over two, three stories, I’ve been involved in the sales and leasing of those buildings.” That includes such essential downtown transactions at City Hall at 1 E. First Street, which the city moved into in 2004. “If you like business, (commercial real estate is) probably the best job in the community. You get to talk to a lot of people and help them use real estate to help with the bottom line.” Ruffin particularly enjoys the leasing part of his job because of the long-term involvement. “The beauty of leasing, is that they’ve got to live together as landlord and tenant for a long time. You truly have to structure the lease so it’s a win-win going in. “The difference between selling software (his first career) and leasing office space is that the software buyer feels good until the sale is done, then everyone moves on. With leasing, we still have to put together the office space to suit them. “I’m thrilled to put people into properties that they’re thrilled to work in every day.” Ruffin is one of the success stories in a career that only sees about 25 percent succeed. Getting there meant working extra long hours and, perhaps surprisingly, putting his family first. After earning an MBA in accounting from the University of Missouri in Kansas City, Ruffin worked for IBM in Kansas City. During a training class he met his wife, Nancy, who worked for the computer giant out of its Las Vegas office. They married and settled in Reno. August will see the 24th anniversary for both marriage and residency. The couple have three sons, twins Rob and Dan, now 20, and Tom, now 14. For several years after moving to Reno, Ruffin continued to work for IBM selling software to gaming companies, a job that required extensive travel. When his twins were toddlers, Ruffin sought a career change that would allow more family time. On the advice of a friend, he made the switch to real estate and found his niche in office sales and leasing. That was 17 successful years ago. The change gave Ruffin time to coach softball and Little League when his boys were young. Today, he and Nancy hike several miles every morning, and bike every evening, with golf and tennis worked in throughout the week.

By keeping business focused in Reno, Ruffin is also able to be active in numerous community organizations, often serving on boards, sometimes as chairman or president. He’s active in business organizations such as the Reno Sparks Chamber of Commerce, Northern California SIOR (Society of Industrial and Office Realtor), Northern Nevada CCIM (Certified Commercial Investment Member), WIN (Western Industrial Nevada), and the Prospectors Club. He’s also been on boards for Rotary, Saint Mary’s Foundation, Knights of St. John, the Reno Philharmonic, United Way of the Sierra, Washoe County OEC, DRI Research Park Board, Nevada Works, and the Blue Ribbon Panel on public transportation, plus various projects with his church, Our Lady of the Snows. While family and community served as the impetus for his career change, he also made the switch at the perfect time. “The first 10 years was the best market we ever had,” Ruffin says. “2002-2007 was a fantasy land. We were smart and used that time (when business was good) to pay down debt.” So when the Great Recession hit and business decreased by 70 percent, “We stayed solvent. We focused on taking care of clients. We were fortunate, we were in a dominant position in the industry. Leases continue to expire regardless of the economy.” With the economy improving, Ruffin is setting new goals for himself and his company. In October, he’ll turn 58. “The end zone is not too far away. I can work for a long time if I want. The knowledge base doesn’t go away. I want to grow new talent.” Among the new talent is Melissa Molyneaux, vice president of Colliers’ Reno office. “She’s delightful to work with. We’ve been working together for 10 years and she knows as much as I do.” Molyneaux is equally happy to be working with Ruffin. “He’s pretty much taught me everything I know about real estate,” says Molyneaux who stated at Colliers as the marketing assistant. “I definitely wouldn’t be working, as I am today, in real estate without him. I didn’t even know I wanted to do this. ...“I’m grateful our paths crossed,” she adds. Ruffin isn’t going anywhere anytime soon. For now he continues to enjoy his job and the opportunity for community involvement it provides. And he’s happy to be in Reno. “I tell people coming in that you’ll never get rich, but you’ll have a great lifestyle and spend time with your family and contribute to the community.” ●


Keshmiri building boutique bowling alleyBy Rob Sabo

[email protected]

Jamy Keshmiri, owner of the old Woolworth’s building at 111 N. Virginia St., is working through final permitting with the City of Reno to develop a small bowling alley with a bar and restaurant in the building’s 14,000-square-foot concrete basement. Keshmiri, who co-owns three gentleman’s clubs in town, originally was stumped on what to do with the large below-ground space that features 14-foot clear heights. But while out clubbing he saw a boutique bowling alley and thought it would be a good fit for downtown Reno. He met with representatives from Brunswick who helped him solidify his plans — which include purchasing six professional-grade lanes from Brunswick that were used in the U.S. Bowling Congress tournament at Reno-Sparks Convention Center. “These are USBC bowling lanes — you could run a tournament on these lanes,” Keshmiri says. “They are the best lanes you can get. “It’s six lanes, and it will be easy to keep open,” he adds. “We do have the (National) Bowling Stadium, but average people can’t use it. It just seemed like something that day or night, if I had the right kind of food, drinks and side entertainment like TVs, pool, DJ music on the weekends, it would have lot of stimulus for people.”

Keshmiri also plans to develop the 14,000-square-foot ground floor of the building constructed in 1965 and want to use the bowling alley/bar to kick-start additional development. Tenant improvements to the space are relatively straightforward, he notes. An entry door needs to be retrofitted, and stairs and some mechanical systems will be upgraded. Fire sprinklers for the area are intact, and there’s no asbestos to remove. However, laborers have been working more than two weeks to disassemble a 1960s-era escalator from the space. “Once that thing is gone, it should be smooth sailing,” Keshmiri says. Tico Construction of Nevada is general contractor on the project. He hopes to have the space open for business early fourth quarter of this year. Keshmiri expects to need a staff of about 30 to 35 people to work as bartenders, food service, and floormen on busy weekend nights. His background as a nightclub owner will help him manage the facility. “A major part of this is the bar, and I know that. We also have food in one of my clubs,” he says. “The only thing new is running a boutique bowling alley. But if you can get the food and bar down, the bowling should be pretty easy.” ●

Jamy Keshmiri plans a six-lane boutique bowling alley with a bar and restaurant in the basement

level of the building at 111 N. Virginia St.Rob Sabo, [email protected]

PUBLISHER Rick Carpenter; [email protected]

MANAGING EDITOR John Seelmeyer; [email protected]

REPORTERS Duane Johnson; [email protected] Rob Sabo; [email protected] Anne Knowles; [email protected]

ADVERTISING SALES Eli Zeiter; [email protected]

ADMINISTRATIVE ASST. Kayla Mullins; [email protected]

CIRCULATION MGR. Keith Sampson; [email protected] GRAPHIC DESIGN Rob Fair; [email protected]

Northern Nevada Real Estate JOURNAL

It all started 40 years ago with one office building. Since then,

Basin Street Properties has grown to 3 million square feet of quality office,

retail and mixed-use properties by relying on our strengths of engaged customer service and responsive management.

Today we are proud to call Reno our home and we work hard to have an

intimate understanding of the regional business and community

needs of this vibrant region.

GIVE US A CALL TO LEARN MORE ABOUT COMMERCIAL REAL ESTATE IN NORTHERN NEVADA. (775) 954-2900 — BASIN-STREET.COM

Building Communities Yesterday, Today and Tomorrow


PresidentReed Simmons, CCIMAvison [email protected]: (775) 332-2800

Past - PresidentDominic Brunetti, CCIMNAI [email protected]: (775) 336-4670

Vice PresidentKevin Annis, CCIMArchcrest Commercial [email protected]: (775) 852-9800

TreasurerTom TraficantiHeritage Bank of [email protected]: (775) 321-4131

SecretarySheila Colfer, CCIMDickson [email protected]: (775) 850-3143

Ian Cochran, CCIMStark & [email protected]: (775) 825-4400

Roger [email protected]: (775) 770-1205

DirectorsLyle D. Chamberlain, CCIMLee & [email protected]: (775) 851-5310

Andrew TourinFirst Centennial Title [email protected]: (775) 689-8510

Ryan Johnson, CCIMJohnson [email protected]: (775) 823-8877

Local CCIM Designees

ABOUT CCIM

A Certified Commercial Investment Member (CCIM) is a recognized expert in the disciplines of commercial and investment real estate.

CCIM designees are part of a network that’s more than 9,000 strong across North America and more than 30 countries.

The Northern Nevada CCIM CHAPTER provides member services, awards scholarships, and delivers other educational and informative programs to commercial and investment real estate professionals in the northern Nevada region.

Join or support the local chapter by contacting Amanda Pratt at [email protected] or (775) 354-3454

Be sure to do business with the most knowledgable brokers in the region...a CCIM Designee.

CCIM Designees- Distinctive and Effective

CCIM NNV CHAPTER PO Box 1505 Reno, NV 89505 www.ccim.com

Local Chapter Leadership

Brian Armon, CCIMCushman & Wakefieldp: (775) 851-9500

Todd Blonsley, CCIMMarcus & Millichapp: (775) 348-5220

Ron Boles, CCIMDickson Realty Commercialp: (775) 850-3116

Brad Bonkowski, CCIMNAI Alliance Carson Cityp: (775) 888-6162

Jack H. Brower, CCIMSperry Van Ness - Gold Dust Commercial Associatesp: (775) 883-3936

Gigi Hay Chisel, CCIMLewis Operating Corporationp: (775) 331-6900 Chad D. Coons, CCIMGillmor Coons Real Estate Group, LLCp: (775) 782-3434 Samuel Douglass, CCIMJohn Uhart Commercial Real Estate Servicesp: (775) 884-1896

Brian Egan, CCIMEgan Commercial Real Estatep: (775) 284-4444 Chris Fairchild, CCIMAvison Youngp: (775) 332-2800

Lance Faulstich, CCIMCushman & Wakefield | Commerce Real Estate Solutions Northern Nevadap: (775) 851-9500 Robert E. Ford, CCIMColdwell Banker Comm Prem Bkrsp: (775) 888-6200

Garrett Hallenbeck, CCIMHallmark Investments & Management LLCp: (775) 786-8488 Skip Hansen, CCIMSkip Hansen & Associates Inc.p: (775) 324-1070 Dave Henselman, CCIMCommercial Project Managementp: (775) 853-3742 James M. Hicks, CCIMJames M. Hicks, Land & Investp: (775) 771-8119 Thomas Y. Johnson, CCIMSperry Van Nessp: (775) 883-3936 Rick LaMay, CCIMAvison Youngp: (775) 332-2800 James Lowey, CCIMMorrissey Realtyp: (775) 322-4401 Tom Miller, CCIMMiller Industrial Propertiesp: (775) 828-4665 Melissa Joy Molyneaux, CCIMColliers Internationalp: (775) 823-9666

Michael A. Nevis, CCIMNAI Alliancep: (775) 336-4623 Aiman Noursoultanova, CCIMCBREp: (775) 823-6983 Paul T. Perkins, CCIMPerkins Companyp: (775) 327-6265 Bruce L. Robertson, CCIMSperry Van Nessp: (775) 883-3936 Floyd Rowley, CPA,CCIMARA p: (775) 224-3183 Mary Irene Self, CCIMWells Fargo Wealth Managementp: (775)689-6316 Kevin Sigstad, CCIMRE/MAX Premier Propertiesp: (775) 828-3380 Dave Simonsen, CCIMNAI Alliance Commercial REp: (775) 336-4667 Dewey Struble, CCIMMaximizing Investment Real Estate Returnsp: (775) 453-0027 John Uhart, CCIMUhart Commercial Real Estate Servicesp: (775) 884-1896 Andie Wilson, CCIMNAI Alliance Carson Cityp: (775) 888-6200

northern nevada real estate journal vol. 1 issue 2

Documents

flocks of investors

small private investors

renosparks market

economy of reno

office properties group

type of property investment

allcash investors

south reno